Abstract
We find that the relative preference of hedonic products is disproportionately enhanced when they are offered at a free price. This “free price bounce” is more subdued for utilitarian products. This is surprising because rational choice theory posits that relative preference amidst two options – say a hedonic and a utilitarian product – remains intact as long as the price difference between them is constant. We propose and demonstrate that this axiom is violated when a hedonic product is offered for free.
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